Patrick,

> But isn't that the point
> Krugman misses? Given that
> the New Deal didn't work,
> really, the only way out
> of the Great Depression was
> extreme devalorisation of
> overaccumulated capital.
> A war that destroys economic
> deadwood (i.e. is wasteful of
> people and resources) is
> often a useful way to
> restructure power relations
> and prepare the ground for a
> new round of capital
> accumulation, especially when
> built on the vast industrial
> ruins of, say, a Germany or
> Japan.

I don't think Krugman misses that point.  He may just disagree with
the "hangover theory" of crisis -- as he once called it.

The devalorization of capital goes on continuously in an economy.
During the ups and downs.  Every time there's a "value revolution"
(Marx), i.e. every time the productive force of labor in a given
production branch increases, capital is devalorized.  Every time
there's a shift in the structure of needs, capital is devalorized.
Yet that doesn't necessarily entail a widespread economic crisis.

What Keynes noted was that the *propagation* of a sectoral slump --
its becoming a nasty, generalized crisis -- had to do with a
*coordination* problem: a sudden, generalized flight to liquidity due
to a sudden, generalized fear of troubles ahead, which fed into
itself.  *That* particular coordination problem could be solved by
decisive public intervention, assuming the political conditions
existed.

That doesn't imply that capital overaccumulated in a given sector
(say, finance or real estate) had to be propped up or kept intact.  It
didn't have to be completely destroyed either.  The market could still
see capital in that sector as wasted.  So it'd get devalorized.  But,
even if massive, such devalorization didn't have to entail a general,
prolonged, nasty crisis.

I don't think the Austrians have a plausible response to Keynes.  I
guess they can argue that Keynesian capitalism is not true capitalism.
 But that's mysticism.  Capitalists also note that nasty, widespread
generalized crises are not good for capitalism.  They learn.  And when
they forget the lessons of history, they are forced to re-learn them
-- or else.

Note that I'm not arguing that the Keynesian remedy doesn't lead to
other problems.  In any case, the limit of capital is capital itself
as a social relation.  The ultimate basis of capital is inequality
plus markets.  Keynesians are willing to violate the market principle
to save capitalism from itself.  It's silly to pretend that their
approach is entirely ineffectual.  On the other hand, increasingly
productive human beings are never going to accept inequality or
alienation as facts of nature.  Nothing will save capitalism from the
power of united, organized, conscious, militant workers.
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